TOP STORIES:
Fed funds jump to 6 pct in mkt, tripling Fed's target (signaling crash) - (www.forbes.com) Federal funds traded in the U.S. interbank lending market were indicated to have jumped to 6 percent on Monday, tripling the target rate of 2 percent which the Federal Reserve sets. The move happened even after the Federal Reserve earlier added $20 billion of temporary reserves to the banking system via overnight repurchase agreements. Early Monday, at around 7:10 a.m. EDT in New York, federal funds had traded at 2.0625 percent. When market inter-bank lending rates shoot up, that often reflects distrust among financial institutions of lending to some other counterparties. Global market participants' risk aversion has surged on Monday as the U.S. banking crisis has escalated, analysts say. The last time the Fed Funds target rate got this out of line with the effective rate was in 1987, and from a base of over 6% not 2%. On a percentage basis, at three times the target rate the spread is unprecedented. It happened today
Crisis on Wall Street –Shocking to most, but very predictable to many of us:
· Lehman Files for Biggest Bankruptcy as Suitors Balk - (www.bloomberg.com)
· ECB, BOE to Pump Cash Into Markets - (online.wsj.com)
· Banks Roll Out $70 Billion Loan Program - (online.wsj.com)
· A.I.G. Seeks $40 Billion in Fed Aid to Survive - (www.nytimes.com)
· Wall Street banks fight for life - (www.ft.com)
· Fed Widens Collateral for Loans to Investment Banks - (www.bloomberg.com)
Greenspan Says Financial Crisis May Be `Once in Century' Event - (www.bloomberg.com) Yes, arrogant Alan, and you are one of the primary players that caused this once in a century event.
Fannie, Freddie Kept Off Federal Budget, Attempt To Fool Taxpayers - (www.washingtonpost.com)
Fannie, Freddie paid off Congress to mask dangers - (msnbc.msn.com)
How housing bill helps banks, not taxpayers - (www.sfgate.com) To understand how it works, you must first put yourself in the shoes of Bank of America, Countrywide Financial, or any of the many U.S. banks facing big losses on delinquent mortgages. If you are a bank, you probably make loans to people to buy homes. You give the borrower money, and the borrower gives you a signed promise to repay - a mortgage - which is secured by the house. Over the past five years, you got to sell a lot of your mortgages to Wall Street banks that then sold them to international investors. Wall Street paid you well for those mortgages. Because you didn't think you'd get stuck with them on your books, you started loaning anything to anyone. But as the housing market's parabolic ascent stalled, you got stuck with a lot of mortgages you hadn't yet sold to Wall Street banks. And some Wall Street banks and investors may have forced you to buy back other mortgages, sticking you with hundreds of billions in bad debt. You also know that some of the mortgages that were sold to investors are packed with lies about the appraised value, the borrower's income and other information that may allow investors to force you to buy them back after foreclosure. You've wisely been dragging your feet on sending out delinquency and foreclosure notices. Foreclosures are recorded on your books, and you're expecting a government bailout, so you are waiting sometimes more than a year to initiate foreclosure proceedings. You don't even know if some of these folks are living in their homes anymore. You have a lot of friends in Congress. You paid them a lot of money to be your friends. But you know that if they start talking about passing a law that will give you a lot of taxpayer money to make up for your losses, voters might get angry and scare the representatives, who then may refuse to vote for your bill because they're worried about getting voted out of office.
Plenty of additional flip-flopping and rumor-mongering by CNBC, NY Times, WSJ and other with Lehman crisis stories:
· Mr. Mortgage: Lehman Watch…Barclays and BofA Drop Out - (www.ml-implode.com) - Why would these 10 banks spend $3bb that they don’t have when they still have a massive mark coming when the deal goes down at 35 cents? Why burn shareholder money in a barrel and allow a competitor to scoop up LEH and compete with you? If I am GS I am thinking, lets let Lehman go BK. Even if my (GS) stock falls 30% I am still alive and over next 10 years I have one less competitor. Also see this piece from Bloomberg: Bank of America Said to Walk Away From Lehman Talks.
· Lehman Races Clock; Crisis Spreads - (online.wsj.com)
· Wall Street Prepares for Potential Lehman Bankruptcy - (www.bloomberg.com) - Wall Street prepared for a potential Lehman Brothers Holdings Inc. bankruptcy after Barclays Plc said it pulled out of talks to buy the firm and the government indicated it wouldn't provide funds in a resolution. Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time. The step indicates that Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds in a resolution.
· Lehman: Crisis Timeline - (www.bankimplode.com) - The latest development on Lehman is that no buyers have emerged in around the clock dealmaking sessions involving multiple parties. The Fed is desperately looking for a deal that does not involve government guarantees, but given Lehman’s balance sheet, many players are uncomfortable with that risk. So that’s where we stand — waiting nervously for one of Wall Street’s titans to be bailed out, taken over or declared insolvent. This is the state of the US financial system in 2008.
· After Two Days of Talks, No Clear Plan for Lehman - (www.ml-implode.com)
Senators Schumer and Menendez Unqualified for Office - (Mish at globaleconomicanalysis.blogspot.com) U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days. "This action would provide immediate relief to many homeowners" and let the companies "turn these non-performing loans into performing assets to minimize losses," Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. may be proven wrong but the economic asininity of those statements is unlikely to be topped, ever. If one could turn non-performing loans into performing assets by halting payments, why not just stop collecting mortgage payments everyone in the county? Every loan would be current and think of all the money consumers would have to buy things. Of course taxpayers would be immediately on the hook for a mere $5 trillion, but who cares about small details like that? Senators Charles Schumer, Robert Menendez, and any other fool who signed that letter is unqualified to be in Congress. It is as simple as that. I urge everyone to vote against Senators Charles Schumer and Robert Menendez the next time they are up for reelection. They are an economic disgrace to the country and unqualified for public office.
AIG: Stock Falls 30%, Bonds and Credit Default Swaps Trading at Distressed Levels - (www.ml-implode.com) - "Even though all eyes have been on Lehman, the potentially more troubling slow-motion train wreck is AIG. The insurer is a large credit default swaps protection writer and provides a host of financing products. Not only is AIG a larger firm than Lehman and could trigger a systemic event in the CDS market alone, but it isn't clear how it could be bailed out if it continues to unravel. Insurers are state regulated; the Fed and Treasury have no relevant expertise and no regulatory authority."
OTHER STORIES:
Lehman Is History - (biz.yahoo.com)
Merrill Lynch Also Dead - (www.cnbc.com)
Roubini: Expect run on all other broker dealers - (www.wallstreetbear.com)
In Frantic Day, Wall Street Banks Teeter - (www.nytimes.com)
A weekend - (financial) storm - (optionarmageddon.ml-implode.com)
Nation's Financial Industry Gripped by Fear For Itself - (www.nytimes.com)
U.S. AAA Rating In Danger From Bailout of Fannie - (www.bloomberg.com)
Alt-A Mortgages Next Risk for Housing Market as Defaults Surge - (www.bloomberg.com)
U.S. Foreclosures Hit Record in August as Housing Prices Fell - (www.bloomberg.com)
The Danger is Not Fully Appreciated - (www.financialsense.com)
No money down "foreclosure fodder" mortgages STILL available - (www.nctimes.com)
A Financial Drama With No Final Act in Sight - (www.nytimes.com)
The real reason commodities are tumbling - (www.reportonbusiness.com)
Housing Bailout Revives Depression-Era Policies - (www.thebulletin.us)
America's banking blues - (www.thestar.com)
AIG: looking to raise $20 billion - (www.ml-implode.com) - ``The company has no hope of a triple-A rating. The most it can hope for at this point in the credit crisis is to survive the cr...
WaMu: No Wampum - Bank Failure May Cost Taxpayers $24B - (www.ml-implode.com) - `` Bove, in an exclusive interview with The Post, said the crushing $32.5 billion in mortgage defaults he is estimating WaMu wil...
UBS to write down extra $5 billion in H2: report - (www.ml-implode.com)
We Have Reached A Deal For Lehman, Sources Say - (www.ml-implode.com) - Another false rumor.
Fannie, Freddie may cause big credit headache - (www.ml-implode.com)
A Financial Drama With No Final Act in Sight - (www.ml-implode.com)
Lehman to File for Bankruptcy Protection (www.nytimes.com)
Lehman Inches Toward Bankruptcy After Potential Buyers Drop Out - (www.bloomberg.com)
Bank of America Said to Walk Away From Talks to Buy Lehman - (www.bloomberg.com)
Bank of America, Merrill Lynch In Merger Talks - (online.wsj.com)
Barclays backs away as Lehman's options dwindle - (www.iht.com)
Lehman fate in balance as talks set to resume on Sunday - (www.reuters.com)
What a Lehman Bankruptcy Filing Might Look Like (www.nytimes.com)
Ike Forces Shutdown of 19% of U.S. Refining Capacity - (www.bloomberg.com)
Major Financial Players Map Out Lehman Options - (www.washingtonpost.com)
Emergency talks on Lehman resume - (www.reuters.com)
Treasury Said to Call on Wall Street to Back Lehman - (www.bloomberg.com)
Lehman's Debt Debacle - (www.forbes.com)
New York Fed Holds Emergency Meeting On Lehman's Future - (online.wsj.com)
Oil Falls to Six-Month Low as Refineries Escape Major Damage - (www.bloomberg.com)
Wall Street Prepares for Potential Lehman Bankruptcy Filing - (www.bloomberg.com)
Barclays Abandons Talks to Buy Lehman Over Guarantees - (www.bloomberg.com)
Wall St. Goliath Teeters Amid Fear of Wider Crisis (www.nytimes.com)
After Two Days of Talks, No Clear Plan for Lehman (www.nytimes.com)
Banks and U.S. Map Out Options in Lehman Crisis (www.nytimes.com)
Derivatives market trades on Sunday to cut Lehman risk - (www.reuters.com)
Lehman Races Clock; Crisis Spreads - (online.wsj.com)
U.S. Gives Banks Urgent Warning to Solve Crisis (www.nytimes.com)
Lehman, AIG, WaMu Drag Down Investment-Grade Debt - (online.wsj.com)
Italy scrambles to save bankrupt airline Alitalia - (www.ap.com)
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